Watchdog group urges bold action to curb film tax credits with Louisiana’s film incentive program

Watchdog says industry ‘renting,’ not buying La.

GORDON RUSSELL|

Louisiana’s controversial film incentive program needs bold changes, not the timid fixes suggested by some state lawmakers, a new report from the watchdog Public Affairs Research Council argues.

PAR’s policy brief, released Friday, says the state should consider scrapping the program entirely, given that studies have found it has consistently cost the state far more than it brings in and that Louisiana is trying to dig its way out of a $1.6 billion budget hole.

Moreover, the paper says, the years of heavily subsidizing film productions have done little to create a permanent, grounded industry in the Pelican State. Though plenty of movies are shot here — with Louisiana supplanting California as the busiest locale for large feature films in 2013 — Los Angeles County alone still employs about 25 times as many people in the film business as Louisiana, PAR writes.

“To put the situation in stark terms, the Hollywood film industry is renting Louisiana, not buying it,” the report says.

Given the unlikelihood of getting rid of the popular film program outright, PAR recommends a series of other major changes, starting with the implementation of a “rolling cap” on the amount of tax credits Louisiana would give away each year. The state’s program, among the most generous, covers between 30 and 35 percent of Louisiana expenditures made by productions that film here.

Currently, the program is uncapped; in recent years, the state has been on the hook for between $208 million and $251 million a year. The current year is shaping up to be a record one, with the state on track to approve $270 million in credits, PAR says.

As a tax credit, the film program doesn’t have to compete for funding with other state priorities, like health care and higher education.

PAR doesn’t specify where the Legislature should set the cap, but the group says it should be “rolling” — meaning that once the tax credits allotted for a particular year are exhausted, film producers left empty-handed would be first in line for the credits issued the next year.

In addition to capping the program’s annual cost, PAR says the Legislature should set a limit on how many credits any single production could receive, which would prevent a couple of big-budget films from eating up all of the credits in a given year. The group did not offer a proposed figure for that cap either.

PAR’s report comes just ahead of a key meeting of the Senate Revenue and Fiscal Affairs Committee, which on Monday will take up a measure that would cap the film program’s cost at $200 million per year. That bill — House Bill 829 by state Rep. Joel Robideaux, R-Lafayette, which already passed the House — will be heard as part of a package of 11 tax bills the panel will be hearing as the Legislature tries to close the yawning budget gap.

While setting limits on the film program would save money over the long run, PAR’s report notes that savings would lag the reforms because the redemption of tax credits always comes after a film is completed — sometimes years later.

Aside from setting caps, PAR says, the Legislature should set limits on subsidies for certain expenses or stop paying for them altogether. For instance, it says, Louisiana should not subsidize high-dollar salaries, such as star actors’ fees, above a certain threshold.

Likewise, PAR says, so-called “above-the-line” spending — money spent on actors, directors, producers and the like — should be subsidized at a much lower rate than the usual 30 percent, and the state should stop covering any portion of “soft costs” like travel, bond and finance fees.

Studies have shown all of those areas produce a much lower return on the state’s investment than other aspects of a film’s production.

Overall, the most recent state study found that Louisiana recouped about 23 cents in taxes for every tax dollar it spends on the program, and as the PAR report notes, that study suggested the real return was even more paltry.

Louisiana’s film industry countered last month with its own study, which found the program actually pays for itself, largely by helping to woo more tourists to the state.

While the PAR report is mostly aimed at reducing the cost of the film program to Louisiana taxpayers, it does recommend some new investment. If the state is truly going to be a player in the movie production game, it should have a top-notch film school, the report says.

Though a number of Louisiana schools have quality film programs, the report says, “each institution uses the program as a cash cow, and in some cases the film programs are subsidizing other departments at the colleges.”

The goal should be to “establish a competitive and alluring center of excellence in the fields of digital and film entertainment,” the report says. That could be accomplished either through a direct investment or by using a “tiny portion” of the money invested by filmmakers.